Record-keeping and filing is often relegated way down the bottom of the to-do list, perhaps the responsibility of a lowly admin assistant or even an intern… But in fact it deserves a much higher priority in terms of your business planning and risk assessment.

In fact, some recent prosecutions demonstrate just how urgent it is to bump your record-keeping towards the top of your list of priorities, not just for good governance but also to ensure that you can argue your case should you face prosecution for late payment or failure to keep proper records.

Failure to prove VAT liabilities

A recent prosecution by the Insolvency Service disqualified a company director for 11 years when he was unable to produce records showing stock purchased and traded, cash transactions or even adequate records for purchases sales income and expenditure. This came to light when the Service was tasked with investigating how much his company, Pioneer Traders (UK) Ltd, owed HMRC for its VAT liabilities.

Director Amandeep Lalli was found liable for wrongful declarations for VAT because he was unable to produce records to back up his VAT repayment claims for August and November 2011 or subsequent returns.

Are you properly discharging your duties as a company director?

CCH Daily quoted Tony Hannon, the official receiver in the public interest unit south, part of the Insolvency Service, as saying: “Directors have a duty to ensure that their companies maintain proper accounting records, and, following insolvency, deliver them to the office-holder in the interests of fairness and transparency. Without such records, it is impossible to determine whether a director has discharged his duties properly, or is using a lack of documentation as a cloak for impropriety.”

VAT returns filed late or paid late also incur various sanctions, from a warning letter to a case at tribunal. As the HMRC website explains, you can be liable for a penalty of up to 100% of any tax under stated or over claimed if you send a return that contains a careless or deliberate inaccuracy.

Mitigate the risk of investigation

So how likely is it that you will be investigated and your VAT return checked? HMRC does carry out routine VAT inspections which can highlight items which could cause them concern. You are more likely to be subject to a VAT inspection if your VAT returns vary widely from quarter to quarter, or if you are in a sector classed as high-risk by HMRC. They have the right to turn up unannounced for an on-site inspection or you may be forewarned that an enquiry is imminent.

As TaxInsider explains, “Most small to medium-size businesses only get a visit once every 5-10 years and some never get visit at all.”

In order to set your mind at rest, we recommend having your VAT returns prepared by suitably qualified accountants such as Sestini & Co and you may also wish to consider taking out insurance which would cover our time in the event that you were subject to an investigation.

The ‘Tax Fee Protection Service’ covers our professional fees in respect of areas such as corporation tax and income tax enquiries, VAT compliance checks and disputes with HMRC, as well as Business record checks, inspections and interventions under HMRC’s Information & Inspection Powers at Schedule 36 FA 2008. Ask us for more information.

The .gov.uk website has a useful guide to directors’ responsibilities for running a limited company and goes into detail about the type of records that must be kept in terms of the company itself, such as directors and shareholders, and of the accounting records that the company must keep, including areas such as receipts, invoices and bank statements.

Contact us

If you’d like to discuss how this might affect you, or for more information about our insurance, call us on 01761 241 861 or email us today. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.

Tackling knife crime - police funding due to rise by £970m from April. Extra funding will recruit and train extra police officers but action needed now so will make additional £100m over the course of the nextyear for additional overtime to target knife crime and reduce violence